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Apple’s ‘Innovative’ Australian Patent Strategy

Written by Mark Summerfield
Senior Associate, Patent and Trade Marks Attorney
Watermark - Intellectual Asset Management
Author/Editor of Patentology Blog --- Google+
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Australia has two different types of utility patent.  A ‘standard patent’ is the traditional type, in which all valid claims must meet the well-established requirements of novelty and inventive step (i.e. nonobviousness), and which has a maximum term of 20 years from filing if all annual maintenance fees are paid.  Extensions of this term by up to five years are available for certain pharmaceutical patents, as compensation for time effectively lost while obtaining regulatory approvals.

The second type of patent, called an ‘innovation patent’, is in many respects unique to Australia.  An innovation patent provides a ‘second tier’ right, with a lower barrier to validity than the conventional inventive step test, and a shorter maximum term of protection of just eight years.  An innovation patent also differs from a standard patent in that a maximum of only five claims is permitted, although there are no additional restrictions on the form of these claims.  For example, any number of them may be independent claims.

Second tier invention rights, more typically known as ‘utility models’ or ‘short term patents’ and having terms of between 6 and 15 years, are not particularly unusual.  Such rights are available, on one form or other in over 70 countries around the world.  In China, utility model patents are obtained about as often by domestic applicants as are standard patents, although the second tier system is barely used by foreign applicants.

Innovation Patents

The Australian innovation patent system differs from most other second tier rights in three important respects.

First, unlike most utility model rights, there are virtually no restrictions on the subject matter of an innovation patent.  Other than claims directed to plants and animals, anything that would validly be the subject of a standard patent can also be protected by an innovation patent.  Most utility models in other countries are limited to articles of manufacture, i.e. physical apparatus.  Processes are typically not protectable, which severely restricts the use of utility model rights for such things as computer implemented inventions.

Second, there is a well-defined innovation threshold test set out in the Australian Patents Act 1990 for assessing the validity of claims in an innovation patent.  The requirement that a claimed invention involve an ‘innovative step’ involves comparing a claim against each single item of prior art (combining of disclosures, as in an obviousness analysis, is not permitted) and assessing whether or not any feature or limitation of the claim which is not disclosed in the prior art makes ‘a substantial contribution to the working’ of the innovation.  This is a form of modified novelty test which requires assessing only whether a novel limitation corresponds with some meaningful functional difference, as opposed to being an immaterial variation.

While many other second tier protection systems set a lower threshold for validity than is required of a standard patent, few codify the test to the extent of the Australian law.  Furthermore, the Australian standard is very low.  The interpretation of the innovative step test has been considered a number of times by the courts – including on appeal – and it is very clear that an innovative step can be present even if the claimed innovation is plainly obvious in view of the totality of the prior art.

Finally, it is a common feature of second tier rights that no substantive examination is performed before issuing the right, and in many countries the proprietor is entitled to seek enforcement without taking any further steps.  The validity of many utility models, for example, is never tested until it is challenged in a court, often only in response to an infringement action.  The Australian system, however, requires that an innovation patent be examined by the Patent Office, and certified as valid, before it can be enforced.  Otherwise, substantive examination is entirely optional, although the process is relatively speedy, typically taking only 2-8 months to complete.  Certification of an innovation patent is therefore a strong indication that the patentee considers that the patent may be required for use in an infringement action.  Only about 20% of all currently live innovation patents have been certified at any time since filing.

Divisional Innovation Patents

An innovation patent application may be divided from a pending standard patent application.  Notably, Australian divisional applications can be used in the same way as US continuations – a divisional application may include any claims that are adequately supported by the disclosure in the original filing.

It is therefore possible to divide an innovation patent from a standard application, and request examination, in order rapidly to obtain a robust enforceable right.  As an added benefit, unlike a standard patent, an innovation patent is not subject to any pre-certification opposition proceedings.  The original application may remain pending, or under examination, for many subsequent months or years.

Since there is a prohibition under the Australian law on ‘double patenting’ (i.e. obtaining two patents with claims of the same scope), grant of a standard patent may be ‘blocked’ until the innovation patent either expires, or is expressly surrendered by the patentee.  However, once the innovation patent is no longer in force, a corresponding standard patent may be issued for the remainder of its normal 20 year term.

This strategic use of divisional innovation patents has become reasonably common.  Indeed, in most of the litigation involving innovation patents which has occurred to date, the asserted patents have been divisionals of pending standard patent applications.

Australia in Apple’s Sights

As readers will no doubt be aware, Australia is one of the jurisdictions in which Apple is currently pursuing litigation against its Android-based smartphone and tablet competitors.  The claims and counter-claims by Apple and Samsung are the subject of a trial in the Australian Federal Court in Sydney which has now been extended into the first months of 2013.  According to reports, as many as 22 Apple patents have been asserted against Samsung, although it is as yet unclear how many of these will actually be pressed at trial.  A number of the asserted patents are innovation patents.

The chart below shows the number of Australian patents issued to Apple each year since 2002.  The numbers are broken down to show the total number of standard patents granted, the total number of innovation patents granted (bearing in mind that an innovation patent generally issues within a few weeks of filing, but is not enforceable until certified), and the number of these innovation patents which have since been certified.  The figures for 2012 are year-to-date (up to the end of July), and it is therefore to be expected that these numbers will increase by the end of the year.  In particular, while only two of the seven innovation patents granted so far this year have been certified, four others are already under examination and are therefore likely to be certified in the coming months.

A number of things are notable about Apple’s Australian patent strategy.

  • The chart shows patents issued each year.  Of course, the corresponding applications were filed somewhat earlier (typically by at least three to four years), suggesting a deliberate increase in Australian patent filings by Apple starting around 2006-2007, i.e. just prior to the launch of the original iPhone.
  • Apple has had almost all of its innovation patents certified (75 so far, out of 85 in total, with four still under examination).  This compares with around a 20% certification rate across all innovation patents filed.  Apple’s 75 certified innovation patents represent over 1 in 20 of all certified innovation patents currently in-force!  Apple is now the single largest user of the innovation patent system.
  • A majority of the innovation patents obtained by Apple are divisionals of pending standard patent applications, implying an intentional strategy of building up a portfolio of robust and rapidly-enforceable rights in the short term, with a view to longer-term protection of inventions where warranted.
  • A conservative estimate of the total costs incurred by Apple in relation to the standard patents, and certified innovation patents, issued in Australia since the beginning of 2007 would be around $1 million.  In top of this, it has a further 222 standard patent applications pending, which will more than double its total expenditure if all ultimately proceed to grant.

These figures must be viewed in the context of an Australian market for Apple’s products which is no more than around 7.25% of that in the US (based purely on total population).  The total cost of Apple’s current Australian litigation against Samsung is difficult to estimate but, as the largest patent case ever run in this country, costs well into the tens of millions of dollars would not be unlikely.

The overall picture is one of a deliberate Australian patent acquisition and enforcement strategy which has been in-place since at least the launch of the original iPhone.  The almost inescapable conclusion is that Apple saw Australia as a key jurisdiction in which to litigate, should this become necessary, and planned for this eventuality for more than four years prior to actually filing suit against Samsung in the Australian Federal court at the end of July 2011.

Global Strategy

While the costs of patenting and litigation in Australia are lower than in the US – perhaps by a factor of two or three – the relative size of the market nonetheless means that if Apple were to assess the value of patent acquisition and enforcement in Australia purely in terms of protecting a local market, it would reach the conclusion that the effective return on investment is still around four or five times better in the US.

However, Apple is pursuing a global enforcement program, and in this context its actions in Australia take on greater strategic importance.  It has already struck one blow against Samsung, by initially winning a preliminary injunction preventing the launch of the Galaxy Tab 10.1 tablet in August 2011.  And while this decision of a single judge of the Federal Court was subsequently overturned on appeal, it nonetheless resulted in Samsung effectively missing the main annual shopping period, with the first products finally arriving on the Australian market less than two weeks before Christmas.

In terms of validity, Apple’s innovation patents will be virtually unassailable, due to the low ‘innovative step’ threshold, while the tests for infringement, and the remedies available, are exactly the same as for standard patents.

Clearly there will be no truce between Apple and Samsung which applies solely to the Australian market.  Both are global companies, with intellectual property rights across all major jurisdictions, and any settlement ultimately reached will need to be agreed on a global basis.  Australia is just one limb of Apple’s overall strategy, but one which it has clearly determined can be used to apply additional pressure to its rivals.

In the meantime, thanks to Apple, this is a rare instance in which the eyes of the world are on the Australian courts and, it seems, will continue to be so into 2013 and perhaps beyond.

 

About the Author

Mark Summerfield is a registered Australian Patent Attorney, working in the profession since 2002. He is also registered as a Trade Marks Attorney in Australia, and is a Patent and Trade Mark Attorney in New Zealand as well. He holds a Bachelors degree in Electrical Engineering from Melbourne University and a Ph.D. in the area of optical fibre communications systems, also from Melbourne University. He is also the editor and primary author of the Patentology Blog. He is also reachable via Google+.


10 comments
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  1. Mark, good stuff. Thanks. Your advice that:

    “Apple’s innovation patents will be virtually unassailable, due to the low ‘innovative step’ threshold, while the tests for infringement, and the remedies available, are exactly the same as for standard patents”

    seems too good to be true. But we see the same pattern for 2nd tier rights in Europe. I imagine the local legislator fondly supposed that owners of 2nd tier rights will be overwhelmingly local, and accused infringers ovwrwhelmingly aliens, so that “too good to be true” would work to the relative advantage of local industry and to the credit of the legislator.

    But, Murphy’s Law, Unintended Consequences, that’s not how it is working out in Australia, and not in Europe either. All credit to Apple, for bothering to find out what strings to pull, in Australia.

    I wonder how much the Aussie courts will squirm, the first time the Alien-accused infringer is an innovative and much-lauded Australian national champion.

  2. Thanks Max.

    You are spot-on about the intended and unintended consequences of the introduction of the innovation patent system. It replaced the old petty patent system, which was also commonly used for strategic purposes, but at least did not set a lower innovation threshold than a standard patent.

    The innovation patent system is currently the subject of a review by the Australian Government’s Advisory Council on Intellectual Property (ACIP): http://www.acip.gov.au/reviews.html#patsys

    I expect that many of these issues will be drawn out by the review. Personally, I would like to see the innovation patent retained, but with the innovation threshold raised somewhat. There should be scope to do this, while retaining a true second tier right, because the recent ‘Raising the Bar’ reforms (which come into full effect next April) raise the inventiveness thereshold (or, more precisely, the prior art base) for standard patents.

    Some restrictions on the filing of divisional innovation patents might also be useful, although there is a risk that this would impact upon legitimate use, such as when an original standard patent application is subsequently found to disclose one or more inventions which do not meet the higher inventive step threshold.

    In any event, ACIP’s recommendations will be interesting, although I am not sure that the Australian government will be ready for more patent reform so soon after the most significant changes in 20 years!

    Cheers,

    Mark

  3. German petty patents used to run with the notion that a lower level of inventive activity is proper. But then, helped by the EPO, the courts in Germany realised this is absurd. When tested objectively, claimed subject matter is either obvious or it isn’t. Basta!

    On obviousness, Australia has been very kind to patentees. I’m not surprised something has now been done about that.

  4. The leading authority on these patents in Australia is Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd [2009] FCAFC 81. It is well worth looking up this case, and also looking at videos of the invention in use. What is amazing is the proposition that Australian truck drvers are likely ever to drive over a number of steel highway posts (which being flexible and springy can bend nearly flat and then spring back). One of my colleagues who spent two months in Australia said yesterday evening that driving in Australia is somewhat more random than in Europe, but even so it would take an extreme individual to drive over these posts in the way shown in the promotioonal videos.

    What is interesting about this case from a practitioner standpoint is that there were corresponding granted patents in Europe and the US. So even though there was nominally a lower innovative step standard there was subject matter before the court that at least arguably met the inventive step standard. The benefit to an applicant is that the range of objections that can be raised in support of an allegation of lack of innovative step is considerably reduced compared to an allegation of inventive step, so that the complexity of litigation will be lessened abd enforcement is likely to be more economic and practical.

    Many thanks for this interesting and informative article.

  5. Thanks for your comment, Paul.

    Here in Australia, driving over roadside posts in the largest available vehicle is not merely a passtime. For some people it is a way of life. The marsupials are tough (a kangaroo can wipe out a hatchback, get up, dust itself off, and hop away into the sunset), so the bull bars (or ‘roo bars) are tougher, and the roadside posts are scared! I have personally seen a funnelweb spider take on a road-train full of sharks, and walk away from the carnage with nothing more that a sprained fang. And don’t even ask about the snakes…

    But it is unfair to say that the driving here is random. There is nothing random about striking a roadside post dead-centre, and challenging it to spring back up!

    But seriously…

    The Delnorth case is one of those in which a divisional innovation patent was filed for strategic purposes. While Dura-Post was fighting the innovation patent in court, it was also opposing the grant of a corresponding standard patent. In the end, Delnorth was successful in driving the Dura-Post competitor not only into the ground, but also out of business.

    Dura-Post was somewhat successful in its oppostion, but Delnorth appealed to the Federal Court, by which time Dura-Post was in no financial position to join the proceedings. As a result, the court overturned the Patent Office decision (see http://blog.patentology.com.au/2010/08/well-known-innovation-patent-takes-next.html for more details).

    With Dura-Post out of the picture, the Australian Patent Office elected to re-examine the Delnorth application in view of the opposition evidence. This resulted in some restriction of the Australian claims but — as you have pointed out — there was nonetheless subject matter in the application which was sufficient to meet the patentability standards of Europe and the US, and correspnding claims also survived re-examination in Australia (see http://blog.patentology.com.au/2011/07/re-examination-limits-rights-to.html).

    The only thing in Australia tougher than our roadside posts are our Federal Court judges. You have seen the movie: that’s not a gavel… THIS is a gavel!

    Cheers,

    Mark

  6. Mark-

    I would like to second Paul C. in thanking you for such an interesting and informative article, which takes the global perspective into serious consideration. Many times here in the US, smaller entities are somewhat ignorant of the possibilities if it is done carefully and with due consideration of the bottom line, especially since they can’t always afford to file abroad on a pretty limited budget.

    To me, Apple’s efforts seem to be a way to cut others off at the pass at a low price, deprive them of early profits, and to avoid having to deal with their competitors in any especially expensive litigation that might occur here in the US courts. It might just be a reflection of the versatility possible with the Australian system of being able to file a prolific Standard patent application, and being able to divide it into numerous Innovation patent applications, with very little lost in the process. It sounds possibly very useful for one of my concepts, which might have a good market in Oz and New Zealand anyways.

    No wonder they are willing to pay 4 times as much per application per protection, just to obstruct others from getting a chance to challenge them later. They can certainly afford to spend a few dimes out of their piggy-bank, to avoid having to spend $20’s or $50’s later if their competitors are otherwise unhindered. It will be very interesting to see how it eventually all plays out.

    Best regards,
    Stan~

  7. Do we see any advantages for a US small business entity or low budget independent inventor to file a Australian Innovation Patent Application and simultaneously a US Provisional Application?

    For example, you might get a quick examination that in a way is a low cost ($150) initial, or an extra independent prior arts search. The “search” and early examination could be helpful for the applicant and/or his patent attorney in deciding to pursue a US non-provisional application; and to sharpen-up his presentation, arguments, and claims for his later US formal application.

    Am I correct in that you may postpone and eventually cancel the payment of the US non-provisional fee? This could be useful if there is a year or more delay for the Australian determination.

    With this approach, you are only risking $150 for the chance of gaining potentially more valuable applicable information; like saving the non-provisional fee and fruitless legal work, and a much more expensive prior arts search fee.

  8. Irl-

    A very interesting approach, which got me to thinking about the possibilities a little further, although I think I would do so a little differently for a few different reasons. For instance, I don’t think Provisional Patent Applications (PPA’s) here in the US are even worth pursuing in most cases, unless the inventor is starting from ground zero, and needs more time to develop a *real* invention before spending more time and money to file a NPA here in the US.

    If the inventor has a real invention already worked out, the PPA route just represents extra expense and more importantly delaying he possibility of getting a granted US patent on the *invention* if any, by a year most times.

    On the other hand, I could file a PCT application, after getting permission from the USPTO to file abroad if I recall it correctly, me being a US citizen, just to make sure there are no American security issues that might need to be kept secret. Then, during the National stage of the PCT application, I could just elect to file in OZ or NZ instead of the US, and go for a very detailed and prolific Standard patent application in Oz for instance, at probably half the price for doing so in the US.

    That would probably result in my getting a pretty thorough and very prompt patent search from the Aussie office, which if it looks positive, might suggest that filing in the US might also be a good idea. The best part might be the new US Patent Prosecution Highway program, where many nations are sharing search results, but I am not sure if Australia has joined yet. If the Aussie search took more than a year though, I might possibly lose my US rights, by not filing with the USPTO in time.

    I am not a practitioner though, so this is all just conjecture on my part. Interesting spelling of your first name, that I have never heard of before. My grandfather Delo was named Earl, which is where my middle name came from.

    Cheers,
    Stan~

  9. Hi Iri and Stan-

    Thanks for your comments!

    First, I am not sure that using an Australian innovation patent filing as a means of obtaining and early, low-cost search, will always (or even often) be a useful exercise.

    There are three things I think need to be taken into account.

    Firstly, innovation patents are published upon registration (i.e. within about a month of filing). Even if they are never certified, they remain part of the public record forever! So, by filing an innovation patent you give up the option to retain your idea as confidential information. Furthermore, you may give your competitors an early heads-up on what you are working on.

    Secondly, the experience with the USPTO/IP Australia Patent Prosecution Highway (PPH) program is instructive. I have heard that the evaluations of the program that have been conducted to date have determined that US examiners have made little or no use of the IP Australia searches on incoming PPH cases. Furthermore, there have been a number of cases where the independent US search has turned up additional prior art.

    Which leads directly into the third point — the prior art available to be cited against an application is not the same in Australia and the US. Most notably, a US application with an earlier filing date which was not published prior to the Australian innovation patent filing date is not prior art in Australia, and will not be cited. Of course, such an application is prior art in the US. So there will be at least an 18 month window of US applications (not including applications for which a nonpublication request was made) which will simply not form part of an Australian search. In many fields of technology, that 18 months is exactly the period in which you would be most likely to find pertinent prior art.

    As for the use of provisional patent applications (PPA), I agree that these represent an additional cost. However, you do sometimes get something for the money!

    We have now reached a point where filing a quick provisional is essentially a useless expense. Any filing (provisional or otherwise) from which you will claim priority in the US after 13 March 2013, or in Australia after 15 April 2013, or pretty much anywhere else in the world already, must fully support the ultimate claims, or the priority claim will not be valid.

    In the US it has been possible to get away with inadequate provisionals in the past, because it is the date of invention that matters, and even a fairly sketchy provisional may be sufficient to support conception, even if the reduction to practice occurs during the following 12 months. In Australia (and New Zealand) there is some allowance for the fact that a provisional is…well… provisional. But that ends in Australia next year.

    So your provisional ideally needs to be as comprehensive as a nonprovisional, and your costs of preparation are therefore no different. If your objective is to have an issued patent as early as possible, then you might be better to file a nonprovisional right away, and get into the examination queue.

    However, one thing a provisional does buy you (for a very low filing fee) is an extra year of patent term at the tail end. Since your 20 years (plus any term adjustment in the US) does not start until the nonprovisional filing date, if you have an invention which will be more valuable a decade from now than it is today, you do not want a fast patent: you would be better off with one that lasts until a later date.

    So for pharmaceutical inventions, filing a provisional is a no-brainer. But this is something that all applicants should think about before deciding on a strategy — when do you expect to see the greatest returns? If the answer is ‘right now’, then prioritised examination in the US (at $2400 for a small entity) is actually pretty good value, whereas a provisional is worthless.

    As for PCT-based strategies, what you propose Stan does not work. You need to remember that your PCT application is your ‘bundle’ of national applications. You cannot add to the specification at national stage filing without losing the benefit of your original PCT filing date. All the detail needs to be in the PCT application, to carry over into every national application. Your deadline for national filing in the US is 30 months after your priority date. In Australia it is 31 months.

    However, you could certainly enter national phase a few months early in Australia, and request expedited examination for less than the cost of a US prioritised examination. This would get you a search report within three months, which may assist with your US filing decision. I would also recommend that you nominate the European Patent Office or the Korean Patent Office (depending upon the technology) to conduct the International Search on the PCT application. That way you will actually get an International Search Report in plenty of time prior to the national stage deadline. So potentially you could have two different patent office searches before making a decision on further national filings. But you still have to bear in mind that 18 month gap in the US prior art record.

    I actually recommend these types of strategies to clients quite regularly. I think that many attorneys outside the US, where we tend to have a more ‘outward-looking’ point of view, are far better at playing the international system for added value!

    But if the US is the only country in which you care about getting patent rights, all of the money spent on PCT filing fees and foreign searches would be much better spent on the prioritised examination fee at the USPTO!

    Cheers,

    Mark

  10. Mark-

    Thanks for your very informative and insightful response! The part about prior art searches is especially useful in my case, although I think I have learned how to do a pretty good search on my own, which seems to be verified according to my very experienced patent agent Dr. Dave during the prosecution of my current application.

    Most of my ideas so far have been in mostly mechanical/aero/hydro fields, so I just guessing that the EPO might be my best choice for an International search? My prior post was mostly academic in nature, looking for boundaries, as I will have to make my current application and hopefully a valid US patent start to pay off to be able to bootstrap into filing anything abroad.

    The reason I am interested in filing in Australia or New Zealand is that I have an idea for a new type of boat propulsion, that sorta does the same thing as waterjet propulsion, that was pioneered many years ago by Hamilton, of New Zealand, apparently. http://www.hamiltonjet.com/

    The way I am doing it might be much simpler and cheaper to produce, and with twin units on a single boat, it might be able to simulate what many front-wheel cars are able to accomplish, by way of camber and castor angles, resulting in greater traction and overall versatility, shall we say for now…. I still need to get my 4-foot long radio-controlled experimental prototype working just right before I get too excited about spending a lot of money on it, but it looks promising, judging from earlier lower-speed versions.

    I sorta feel like I owe you some sort of retainer after the fact for all of your help!

    All the best,
    Stan~

    PS- The full sized experimental prototype will use the power unit out of an Austin America, including the hydraulic front suspension, otherwise known as an Austin Australia in some parts of the world. (a bigger version of the original Austin or Morris Mini Cooper)